How TESLA is planning to solve the Lithium Battery Supply Chain problem

 

On tesla's battery day, the founder of the company Elon Musk stated that they were going to start building their own cathode facility in North America by leveraging all of the North American resources that exist for nickel and lithium and by localizing the cathode supply chain and production, Tesla could reduce miles of travel the raw materials take to end up in the cathode factory. This could reduce costs by eighty percent which is huge for the company as one of the challenges Tesla is facing from early days is the battery manufacturing and capacity.

 

Now by building their own cathode production plant in the Tesla factory, the company is planning to defeat one of its bottle neck head on.

 

Currently Panasonic manufactures tesla's battery cells in the Giga factory, located in Nevada, USA. But where does the cathode come from?  

A cathode manufacturer by the name of Sumitomo in Japan but no, this is just the assembly part where did the raw materials come from, particularly the nickel and lithium.

Well this is where things get complicated, currently tesla buys their lithium from three different companies Albemarle, Ganfang and Lyvant in the case of shortage, they source their lithium from brines in Argentina and ship it to china for processing before sending it to Sumitomo for cathode production.

 They source their lithium from hard rock mines in Australia, again this lithium has to be sent to China for conversion to lithium hydroxide before being sent to Sumitomo for cathode production.

 Currently lithium is mined in one continent, shipped to another for processing and then shipped again to another country for cathode production then shipped halfway around the world to be put into a battery cell.

 so now one can see why a U.S cathode plant with North American source to lithium would make a huge difference.

 

 Now let's look at Nickel,

Tesla get their nickel from Sumitomo in the form of the cathode but where does Sumitomo get their nickel from?

 Unfortunately Sumitomo does not disclose that information but some say it seems highly probable that the sources are New Caledonia, Indonesia, the Philippines and it's also possible that they could source their nickel from Russia, australia and Brazil

 

 So again, looking at the distances that the nickel has to travel to japan before it gets sent to the united states and not to mention we have not yet worked out if the nickel gets sent straight from mine to Sumitomo or if it has to be sent to china for processing

 

This is the problem with the current supply chain. Sky-high transportation costs and large amounts of emission and pollution produced moving these materials around the world. Also noting that Sumitomo and the Chinese converters take their profit cuts, which means there are major cost savings that can be done by manufacturing the battery yourself.

 

Now that we have seen how much room there is for improvement let's have a look at what tesla is going to do to address the supply chain issue.

 The first thing Tesla announced is that they're going to build a cathode plant in the United States and while we don't know exactly where the location, one can guess it would be close to the Texas Giga factory.

 While about sourcing their lithium and nickel from north, Elon Musk said that they would do on-site lithium conversion by using a new process that they were going to pioneer in, calling it Sulfate-free process. Thus skip the intermediates would contribute the reduction in lithium cost by 100%

 

They also mentioned about the lithium ore extraction process in the Tesla's presentation. they mentioned the lithium clays in Nevada which is the united states largest deposit however as Elon noted they are working on a new process to extract the lithium from the clay and we don't yet know how long this is going to take until they can perfect it and scale it.

They are working on an environmentally friendly way and discovered that they could actually use table salt that is sodium chloride to basically extract the lithium from the ore adding that nobody had done that before.

 

The company got rights to a lithium clay deposit in Nevada for a plot over ten thousand acres and their plan is simply mix clay with salt put it in water and salt comes out along with the lithium.

 

Moving on to Nickel, and as we can see there seems to be two options one import nickel from the rest of the world or two import nickel from Canada which is the world's fifth largest producer of nickel.

 Polymet mining and a nickel explorer by the name of Telon metals seems to have a high grade nickel deposit in Minnesota which Tesla is planning to make use of.

 

So there we have it, Tesla is going to massively shorten their supply chain by having their own cathode plant in the united states using predominantly raw materials from North America and this is how distances are reduced by 80% meaning reduction of costs, reduction of emissions, reduction of pollution and political risks dealing with multiple countries.